Charming Shoppes Ain't Charming Investors: Fool by Numbers

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On Aug. 22, Charming Shoppes (Nasdaq: CHRS) released second-quarter earnings for the period ended Aug. 4.

• With net sales inching up only 1%, Charming Shoppes seems to be losing appeal as its core customers tighten their belts in discretionary spending.
• Like most other retailers these days, Charming Shoppes was forced to clear out excessive summer inventory by using aggressive markdown strategies. This hurt margins and ultimately led to a significant drop in earnings.
• Despite tough economic conditions, management is optimistic about some of its new initiatives -- such as the launch of the revolutionary "right-fit" pant -- to help revitalize the company's financials.
• While Charming Shoppes management is confident in the company, the Motley Fool CAPS community doesn't seem so sure of its future; the stock receives only two stars out of five. Meanwhile, competitor Dress Barn (Nasdaq: DBRN) earns a full five-star rating. Target (NYSE: TGT) isn't far behind, grabbing four stars.

(Figures in millions, except per-share data.)

Income Statement Highlights

	Q2 2008	Q2 2007	Change
Sales	$770.9	$763.4	1.0%
Net Profit	$18.3	$32.6	(43.9%)
EPS	$0.14	$0.24	(41.7%)
Diluted Shares	130.2	139.4	(6.5%)

Get back to basics with the income statement.

Margin Checkup

	Q2 2008	Q2 2007	Change*
Gross Margin	28.5%	30.0%	(1.5)
Operating Margin	3.7%	6.8%	(3.2)
Net Margin	2.4%	4.3%	(1.9)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q2 2008	Q2 2007	Change
Cash + ST Invest.	$259.9	$234.0	11.1%
Accounts Rec.	$3.1	$3.1	(1.1%)
Inventory	$405.6	$381.5	6.3%

Liabilities	Q2 2008	Q2 2007	Change
Accounts Payable	$165.3	$173.7	(4.8%)
Long-Term Debt	$306.2	$186.5	64.2%

The balance sheet reflects the company's health.

Cash Flow Highlights

	YTD 2008	YTD 2007	Change
Cash From Ops.	$163.5	$175.6	(6.9%)
Capital Expenditures	$74.0	$55.0	34.6%
Free Cash Flow	$89.5	$120.7	(25.8%)

Free cash flow is a Fool's best friend.

Related Foolishness:

• Target Bleeds
• Fashion Bugs Charming Shoppes
• Shocking! Dress Barn Wins With Dresses

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean. This data has been provided by Netscribes. To provide feedback on this article, please click on the "feedback" button below.